A beginner-friendly explanation of withholding tax in Nigeria — what it is, who should deduct it, rates and penalties.
INTRODUCTION
Withholding Tax (WHT) is one of the most misunderstood taxes in Nigeria. Many businesses unknowingly violate WHT rules and face penalties. This guide simplifies WHT for business owners.
1. What is withholding tax?
WHT is an advance payment of income tax deducted at source from certain payments.
It is not an additional tax — it is part of the final tax.
2. who must deduct WHT?
• Companies
• NGOs
• Government agencies
• Business name owners
• Individuals in business
3. Common transactions where WHT Applies
• Rent
• Professional fees
• Contract payments
• Consultancy services
• Commission
• Royalties
4. WHT rates in nigeria (general guide)
• Individuals: 5%
• Companies: 10%
(Rates may vary depending on transaction)
5. penalties for failure to deduct or remit
• Severe fines
• Interest accumulation
• Loss of tax clearance
• Legal action
CONCLUSION
WHT compliance is crucial under the new tax regime.
For tax advisory services, contact: 📞 08069454600